b) Consider the following information about Asset A and Asset B: Rate of Return (rj) State of Economy Probability of Sta

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B Consider The Following Information About Asset A And Asset B Rate Of Return Rj State Of Economy Probability Of Sta 1 (109.29 KiB) Viewed 37 times

b) Consider the following information about Asset A and Asset B: Rate of Return (rj) State of Economy Probability of State of Economy (Prj) Bust Normal Boom 15% 70% 15% Asset A -8% 13% 48% Asset B -5% 14% 29% For each asset, compute i. the expected rate of return. (6 marks) i. the standard deviation of the expected return. (6 marks) ii. If the market risk premium is 8%, the risk free rate is 4%, compute the Beta (B) for each asset using capital asset pricing model (CAPM) formula and identify which one has the most systematic risk and riskier asset. (6 marks)